G20 Executive Talk Series

September 2016

Global Development

Authored by: Viktor F. Vekselberg

Innovation as a Sustainable Growth Driver

Innovation covers all the aspects of G20-B20 activities.

Assuming the G20 presidency for 2016, China declared the desire to work together with the partners towards an innovative, invigorated, interconnected and inclusive world economy. Hence the theme of the G20 2016 Summit, where innovation comes first. According to the Chinese agenda “the G20 should forge new growth engines by promoting innovation-driven development, encouraging across-the-board innovation in science and technology, in development concepts, and in institutions and mechanisms, as well as in business models”. In other words, innovation covers all the aspects of G20-B20 activities.

The role of innovation in the ongoing G20-B20 efforts to secure sustainable growth is hard to overestimate. The topic is on the agenda for many years. Sometimes innovation issues make a separate block for a specialized G20 or B20 taskforce, while in other cases, like in China this year, they form some kind of a red thread running through the activities of all the taskforces. But these issues are never forgotten neither by business leaders in their annual recommendation to the heads of states and governments, nor by their addressees.

Every year makes the significance of new technologies and new culture in research and enterprise more evident. What once seemed a foray into the digital economy today has become a critical foothold in the economy of the future that operates on different provisions and conceptions than what the world has relied on before. Today innovation is a process synonymous with growth, critical for enduring in the years to come and holding a competitive position in the global economy.

The B20 Innovation and Development as a Global Priority Taskforce, functioning during Russia’s G20 presidency in 2013, proclaimed an ambitious target to find the ways and means for transition to an improved global environment, to mobilize business potential and secure government support to facilitate
a transfer towards the new technological mode, with its:
■ World of creators – where policy approaches to innovation, including on intellectual property (IP), stimulate a dramatic increase in the creativity of citizens;
■ World with universal energy access, secure supply, reasonable prices (as well as mitigated price volatility), and minimal environmental damage – where investments are made in renewables that can be effectively and economically sustained, and traditional energy sources are further developed and environmentally improved with cutting-edge cost-effective and productive innovation;
■ World of unprecedented healthy longevity – where policy makers focus on better living conditions and better quality of life;
■ World of sustainable resource consumption with an increasing use of biotechnological products and processes;
■ World of more rational, better-informed decision-makers – where information and communications technologies (ICT) are universally accessible and applied to all sectors of the global economy.

Every year makes the significance of new technologies and new culture in research and enterprise more evident. What once seemed a foray into the digital economy today has become a critical foothold in the economy of the future that operates on different provisions and conceptions than what The world has relied on before.

There was a progress in some directions over the years, but all the above targets are still valid and to reach them serious enforcement in such areas as IT, energy efficiency and new energy sources, healthcare, biotechnology and ICT is required.

The global IP regime is crucial for both innovation and development. According to Joseph Stiglitz, Nobel laureate economist, “intellectual property is one of the most important aspects of globalization, especially as the world moves toward a knowledge economy. How we regulate and manage the production of knowledge and the right of access to knowledge is at the center of how well this new economy… works and of who benefits. At stake are matters of both distribution and efficiency1.” Steps are being made in this direction gradually as countries see that uniform IP regulation and beneficial regulatory modes yield great results for the economies, although many dimensions still remain to be tackled.

Improving energy efficiency, rebalancing the conventional and employment of new energy sources are the necessary overarching steps aimed at cutting costs, reducing emissions, and using resources in a sustainable and effective manner. More efficient energy production, the elimination of losses in distribution networks, efficiency in energy consumption, as well as encouraging responsible behavior of every stakeholder are essential. And innovation is a critical component of greater energy efficiency.

Focusing healthcare priorities on healthy life expectancy and productivity, on respective reallocation of healthcare expenditures, promoting production and use of bio-based processes and products, stimulating R&D in biotechnology are the other sources to promote sustainable development through innovation.

The last but not the least block of innovation priorities is related to enhancing ICT Internet infrastructure development, to enable broadband access for all, to data protection and privacy. According to SPIEF-2016 experts, last year’s 90 million cyber-attacks cost global businesses as much as USD 575 billion.

The fourth industrial revolution (Industry 4.0), driven by convergence of digitalization, robotics and additive manufacturing, leads to a new era in production efficiency and productivity. This is expected not only to reduce costs and enhance product development, but to alter fundamentally the role of labor in the entire economy.

Innovation as the application of better solutions that meet existing or new requirements leads to better goods and services, business models or technologies, to progressive trends in the markets and in society.

Despite the global nature of many challenges that G20 countries face, the search for innovative solutions is carried out today to a large extent at the national level or within individual transnational corporations.

Without massive innovation 17 UN Sustainable Development Goals adopted in September 2015 to end poverty, protect the planet, and ensure prosperity for all, are hardly achievable. The same applies to the Paris agreement on climate change of last December.

Despite the global nature of many challenges that G20 countries face, the search for innovative solutions is carried out today to a large extent at the national level or within individual transnational corporations. And the recent innovation ranking, based on countries’ comparison in high-tech companies and modern manufacturing, patents and post-secondary education, research and development and qualified research staff, shows that in Top 5 not all are the members of G20 club. There is still a lot to be done by global leaders to secure the full use of innovation for sustainable growth not only at their summit in Hangzhou, but also in the preparation of future summits in Germany and India.

One example of how such challenges of modernity may be tackled is the Skolkovo Innovation Centre near Moscow. Regulated differently than any other technological centre, it is a staple of a high technology international business complex created to promote research and development, to encourage entrepreneur spirit and convert the start-ups into full scale enterprises capable to become the leaders in their industries. One of the notable issues that became apparent after its creation is that today neither science nor innovation may exist in an isolated environment. Many advanced applications of new technology are in demand in markets different from the country’s own and many new creations are only possible because of foreign patents. Many people cross borders not only to do research, but also to acquire critical elements for their solutions that may be produced elsewhere. This process is gaining momentum with every year, creating a new highly intellectual kind of the global division of labor. Innovation is markedly different from incremental research as it is often conceived outside of the regulated environment and therefore disrupts the technological landscape. Being conducive to these new developments means supporting teams that bring their bold ideas to the market, helping them on their feet and providing necessary support both in terms of legal protection and advice. Skolkovo does this for both Russian and foreign companies, facilitating their communication and building bridges that help innovators make the daring step that separates them from success and contributing to the new global economy. By creating a regime that allows innovators to focus on their work, we stimulate new developments across all the five areas that the 2013 taskforce addressed and believe that joining the initiatives that many countries share in the domain of innovation will greatly contribute to the global progress.

1 J.E. Stiglitz, Economic Foundations of Intellectual Property Rights, Duke Law Journal, 57 (2008).

Viktor F. Vekselberg is Chairman of the Board of Directors of the Renova Group, President of the Skolkovo Foundation. Born on April 14, 1957 in the town of Drogobych, Lviv Region. Graduated summa cum laude from the Moscow Railway Transport Engineering Institute in 1979. In 1990, Viktor Vekselberg founded Renova management company. In 1996, he founded SUAL Group. In 1997, together with partners he founded Tumen Oil Company (from 2003 – TNK-BP). During the period between 2007 and 2012 he was the Chairman of the Board of Directors of United Company Rusal (UC Rusal). In March 2010, Viktor Vekselberg was appointed as Head of the Skolkovo Innovation Center project. Viktor Vekselberg has been President of the Skolkovo Foundation since June 2010.

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